Says Deepak Mohoni, who runs Trendwatch, a technical advisory firm: "We are in wave five of a rally that started from (Sensex) 2905 this May and has potential to stretch between 4600-4900 on the upside. After this rally is over, a larger and more time-bound correction is likely to set in before there is any more upside and this could last for upto six months."

Rohit Srivastava, another technical analyst with 12 years of experience under his belt, says similar things.

"The Sensex is in a five-wave impulse rally from its May 2003 low of 2905 and we are now entering the last and final fifth wave of the rally."

If Mohoni and Srivastava are to be believed, investors should be thinking of booking at least some profits in the weeks ahead.

But just as there were skeptics who didn't believe a boom would happen in May, it's tough to believe there's a speedbreaker ahead just when the markets are firing on all cylinders.

More so when nobody - Mohoni included - believes that its time yet to batten down the hatches and opt out of equity.

To understand the mechanics of this rally, The Smart Investor spoke to some of the most prolific technical analysts in the markets and asked them for their take on the unfolding scenario.

Going by their predictions, it doesn't appear as if the party is over and it may be just a matter of time before the 5000 levels are breached.

"The Sensex has broken all resistance levels in its upsurge and we could see the index climb to 4790 in a month and touch the 5000 levels by January 2004," says Hitendra Vasudeo, a technical analyst at stockmechanics.com.

"We are in a fairly strong bull market right now," reaffirms Mohoni, who saw the current bull market building up as early as May 5 when the Sensex was under 3,000. He had also stated then that mid-caps were likely to do well. And they have.

Says Salim Dawoodani, vice president - equity research, Darashaw & Co, a brokerage house: "The Sensex seems to be headed toward the next immediate target of 4790, which was the intermediate high of September 2000 as well as the 61.8 per cent Fibonacci retracement level of the fall from 6150 to 2594."

Dawoodani uses technical analysis for managing the portfolios of clients as well as for proprietary trading.

However, there could be bumps on the way. Srivastava, who works for Sharekhan, the retail-cum-online broking arm of SSKI, says that the Sensex is now entering the last wave of the uptrend that had started from May 2003.

Going forward, therefore, the market breadth would be weak - the number of shares advancing will be fewer than those that did in the previous rallies of the last five months.

Vasudeo also has a scarier note of caution: "Since 1992, the Sensex has a history of going back to square one after touching a new high and if the Sensex breaches the 6150 level in the long term, we could probably end up where we started."

However, Dawoodani says that only a decisive breach of 4100 levels could prove to be fatal.

The techies believe that auto and pharma sectors are going to lead the rally. Vijay Bhambhwani, CEO, BSPLIndia.com, who runs a technical newsletter, feels that the steel and oil and gas sectors also hold a lot of promise.

He feels that ONGC, Reliance, GAIL, Mahindra, Tata Motors and Tisco are the pick of the lot, looking at the MACD (moving averages convergence divergence) indicators.

"The current upmove has the potential to re-test its high of 6150 over the next one year with all the major sectors having their moment of glory on a rotational basis" says Dawoodani.

"However, auto and pharma sectors look the strongest" he adds.Vasudeo, meanwhile, bets on the pharma Trimurti of Ranbaxy, Dr Reddy's and Cipla to outperform.

Should one believe what the techies have to say?

Technical analysts have been a damned lot. Just like astrologers, they have been constantly accused of being too taciturn, covering up their predictions with enough ifs and buts to do a lawyer proud. Many market watchers also take technical analysis with the proverbial pinch of salt.

But when stock prices move north and south on a daily basis without apparent change in the underlying fundamentals, it's obvious that technicals can help investors spot trends early.

Moreover, not all technical analysts rely exclusively on forecasting tools for making their predictions.

Says Mohoni, "Scientific studies have clearly shown that forecasting tools simply do not work (everytime) as there is a strong random component in market price movements".

He prefers to work out strategies to deal with the uncertainty while exploiting the trend component of price movements.

To help our readers understand the arcane science of technical analysis, we have profiled a few techies - and a record of their hits and misses - so as to offer an insight into the method behind their madness.

Deepak Mohani, CEO, Trendwatch

Favourite indicators: Relative price strength for selecting stocks, and some of Donchian's breakout rules for catching a trend. Simple 'eyeball' methods also provide good results.

Misses: Mohoni says he does not considers any of his calls a miss since he always follows strict stop-loss rules.

Take on markets: We are in wave five of a rally that started from 2905 this May and has potential to stretch between 4600 and 4900 on the upside and will reverse trend to downwards below 4100.

After this rally is over a larger and more time-bound consolidation/correction is likely to set in before there is any more upside and this could last for upto six months.

Rohit Srivastava, Market analyst, SSKI

Favourite indicators: Primary tool is Elliott Wave analysis, followed up by momentum trading tools and money management for a properly formulated strategy. In momentum RSI and KST are the most used indicators. Bollinger bands and moving averages always accompany every chart.

Hits: Most accurate predictions have been catching 300-500 point Sensex moves within one-two days of their starting (captured almost 90 per cent of them, several times over the last two years). More recently, the entire post-Budget decline from 3400 to 2905 between March and April 2003.

Misses: The misses have been the first leg of the recent rally from 3100-3750 in May/June.

Take on markets: The Sensex is in a five wave impulse rally from its May 2003 low of 2905 and we are now entering the last and final fifth wave of the rally.

This will be sporadic but weak in breadth, i.e, the number of shares advancing will be fewer than those that did in previous rallies of the last five months.

Also, the dominance of a large-cap stock - Reliance - will be obvious. The final leg, as always, starts with skepticism and ends with over-enthusiasm.

The targets would be anywhere from 4546 to 4780 on the upside. The major downside support is 4100 and as long as we are above it this view will hold true.

In the short-term though minor corrections or shakeouts to the range of 4366-4280 would be opportunities to buy.

Investors will also have to prepare themselves to book profits at the end of this rally as it will offer substantial gains year to date and you will need to let go of your greed to earn more.

Salim Dawoodani, Vice President (equity research), Darashaw & Co.

Favourite indicators: Gives more importance to chart-reading techniques. Believes indicators and oscillators are just ancillary tools.

Hits: The fall in tech scrips in March 2001, the bottom of Telco two years ago and its subsequent rise.

Misses: Failed to judge the magnitude of the upmove in December 2001.

Take on markets: The upmove from 2904 has been almost unidirectional with hardly any 'time-wise' correction. I have always maintained that euphoric bull markets are 'topless'.

In such a charged-up market, all major resistance levels like Fibonacci retracement levels, previous intermediate peaks and even Island reversals are cleared effortlessly.

The nearly two-year move between the levels of 2800 and 3500 laid the foundation of this upmove. Once the Sensex moved beyond that accumulation zone, it has garnered momentum.

The Sensex seems to be headed toward the next immediate target of 4790, which was the intermediate high of September 2000 as well as the 61.8 per cent Fibonacci retracement level of the fall from 6150 to 2594. Only a decisive breach of 4100 levels could prove to be fatal.

The current upmove has the potential to re-test its high of 6150 over the next one year. All the major sectors are going to have their moment of glory on a rotational basis. However, auto and pharma sectors look the strongest.

Hits: (a) Sensex, so far, going exactly as projected; (b) predicted fall in crude oil prices after a 21-month rise up to September 2000; (c) predicted big rise in Pakistan Karachi Index in October 2001 (Index rose from 1400 to 4600 thereafter); (d) discovered two-year cycle on Sensex in 1994, which still works; (e) projected the 1980 bottom of Sensex in March 1993.

Misses: Failed to foresee the 9/11 fall!

Take on markets: I am assuming a Diametric formation, a seven-legged corrective pattern, for the rally commencing from May 2003. This new wave-structure has a small 'D' leg (contraction point) giving it a shape like a 'bow-tie'.

We are currently into the last 'G' leg of such a pattern as shown on the chart, which is projected to reach 4850-4925. This is based on the principle that the 'G' leg of such pattern usually achieves equality to the 'A' leg.

A multi-month correction would follow thereafter, at the end of which, the 'B' leg can resume moving upwards.

The long-term corrective channel: The monthly Sensex log-scale chart shows a beautiful parallel channel enclosing the Sensex movements of last 13 years.

This channel supported the recent bottoms as shown. The upper channel line reads 7400 showing the maximum that can be achieved even while continuing within the corrective channel over the next 18 months.

Specific stocks & sectors: Stocks like Tisco, BSES are still looking good simply because they topped way back in 1992, and had already seen 11 years' of consolidation before the current rally. Nestle and ITC are good long-term bets.

Sector-wise, Banking looks good on expansion of service industry. PSUs should continue to do well due to low floating stock. Smart moves in IT stocks should throw a surprise.

Devangshu Datta, Technical Analyst

Favoured indicators: I use standard price-volume indicators. Also do a lot of correlation/beta analysis between different markets (commodities, interest rates and forex) and Fibonacci and Spectrum analysis using Fourier across several timeframes.

I also use technical analysis on standard fundamental indicators - looking for buying patterns with reference to standard balance-sheet valuation ratios like price-earnings. This has often helped me pick up turnaround stocks though it's unusual.

Hits: Generally tended to be right around 65-70 per cent of the time about trends. Usually missed the absolute top or absolute bottom.

Misses: Too many inaccuracies to be worth listing!

Take on markets: The peak targets for the main market indices would be in the range of Sensex 5750-6600, which is roughly equivalent to Nifty 1900-2100.

Thus, we expect the rally to last between four and 12 months and produce net gains of another 25-40 per cent in index terms.

The wide variation in time period and in anticipated returns is partly because you will get different opinions on whether the previous market bottom should be calculated from September 2001 or from April 2003.

When it comes to sectors, the breadth of the rally is amazing. There hasn't been a bull market since 1992, which displayed such breadth. There seems to have been multi-baggers available everywhere.

In terms of sectors, we can pick a few sectors, which are likely to continue being outperformers. The heavy engineering sector, the healthcare & pharmaceuticals sector, automobiles, banks, PSUs especially energy PSUs, and selective IT-tech stocks, including telecom service providers.